Summary of the session: Are Policy Makers alone in charting recovery from crisis? How researchers can help

The recording of this session is now available on the REPLAY section of the event web: https://euregionsweek2020-video.eu/video/are-policy-makers-alone-in-charting-recovery-from-crisis-how-researchers-can-help

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Moderator: Peter Wostner, Senior Adviser, Institute of Macroeconomic Analysis and Development, Republic of Slovenia, Slovenia.

Speaker: Sandrine Labory, Associate Professor, Department of Economics and Management, University of Ferrara, Italy.

Are Policy Makers alone in charting recovery from crisis? How researchers can help.

The proposed answer to the question was: the current crisis is complex, researchers love complexity and can help with bottom-up and multidisciplinary approaches.

The complexity of the current crisis results from the fact that is multifaceted and interlinked with different important challenges and crises. The pandemic is causing a deep recession, and is particularly affecting vulnerable people (low-skilled, low income, and less-teleworkable jobs such as tourism, entertainment and people’s care) and vulnerable areas (densely-populated regions, with low income). Effects are both short-term and long-term: a return the previous normal is not expected, but the way people live and work will be transformed.

But the complexity if also due to the fact that the pandemic is not the only challenge. Other challenges / crises include: climate change and reduction in biodiversity, rising social and regional inequalities, as well as the fourth industrial revolution that is inducing deep structural changes in many industries, with impact on jobs and people. Even more, challenges are interrelated, making the situation even more complex.

What action can be adopted in this context?

Complex policy mix are required, including economic governance (need for transformative governance at all levels of government, with strong coordination vertically across levels of government and horizontally between areas of government and between regions); labour market (old jobs disappear, new jobs requiring new skills are being created, so there is first a need for a huge training and education effort); competition and product market regulation (avoid monopolies, anti-competitive behaviour); innovation and entrepreneurship, etc.

Policy mixes can jointly address the different challenges and allow the socio-economic system to develop in a more sustainable way.

HOW RESEARCHERS CAN HELP?

Complexity is not only in terms of difficulty of challenges but also in terms of numerous causes and effects, that are interrelated, sometimes reinforcing each other, sometimes not,

Implies:

Need for high level experts, that have deep and extended knowledge
Need for multidisciplinarity, not only between different scientific fields, but also between stakeholders who each have different knowledge and points of view relative to the problems
Strong role of regions

WHY Strong role of regions?

Complexity: difficult to understand all the gears at the level of whole nations; regional territories are smaller so easier to grasp, though complex still. But they have to be analysed taking the whole system to which they belong into account

Societies and economies are first of all made of people: regions are closer to people so can better understand problems and explain challenges. Regions also generally have important policy responsibility

Subnational governments account for a large share of public expenditure, not only in housing but also in recreation, culture, education, economic affairs and health. The strong role of regions and local communities is also stressed in the literature on emergency management and reconstruction after disasters. This research has helped a lot in charting preparedness, management of emergency and recovery after natural disasters. Some of their main results include the following:

The more complex and uncertain is the policy problem, the more local communities should be involved
Crisis management (emergency and recovery) require the coordination of actors at various levels (local, regional and national and supranational), because information and resources are located within different networks (governance)
Leadership is important, namely capacity to collect information, take decisions, build a narrative and mobilise people
Emergency requires rapid action: involvement and empowerment of communities allows to reply better and more rapidly.

Applied to the Covid-19 crisis, researchers tell us that in this context need for:

Clear and transparent communication, close to people and communities
People must change behaviour: need for trust and empowerment of communities
Preparedness and protection of vulnerable people

Research on disasters also stresses the importance of “taking advantage” of the crisis to orientate reconstruction towards more sustainable development paths.

The presentation then gave an example of researchers helping to chart recovery, in the Emilia Romagna region, from 2010 to 2020. The region faced different crises in that decade, from global financial crisis to natural disasters (floods, earthquake) and now the pandemic. The region has shown good economic performance in the last decade, from GDP growth to exports and also reduction in unemployment. The basis of policy definition has been a work on regional industrial policy by Patrizio Bianchi and Sandrine Labory proposed a book published in 2011, titled Industrial Policy after the Crisis, Seizing the Future. These authors propose four pillars on which to base industrial (and development policies), namely entitlements, provisions, innovation and the territory, also corresponding to the current challenges: rising inequalities (social policies, between territory and entitlements), environment (territory and resources), the fourth industrial revolution (new knowledge and innovation, new training and education for people). The sundial was also used to chart recovery after the 2012 earthquake: in the definition of the priorities in particular. The earthquake did not cause many injuries or deaths but destroyed many factories in the industrial core of the region (producing about 2% of Italian GDP). Up to 800,000 people were affected, having their home partly or completely destroyed or their workplace destroyed or unusable. The region took the lead in emergency management and reconstruction (unlike previous earthquake in Italy were national commissions were nominated), with two main priorities: schools (social, reassuring because when children go to school it is normal life again) and industries (for jobs and people’s income, as well as economic development of the region). ONLY 5 months after the earthquake, all pupils were at school, and almost all factories had been rebuilt, often with increased productive and R&D capacity.

Conclusions

Regions have an essential role because they are close enough to information and communities and have a proper scale for strategic action
Role in emergency management but also recovery (they represent on average 60% of public investment in OECD countries)
Recovery should be charted taking account of the multiple challenges: for this purpose, researchers (especially regional economists, in dialogue with other disciplines) can help.